It isn’t very long ago that we lived in a world without the Initial Coin Offering, or ICO. Used by new and innovative companies to raise cash and bring their product or service to market, the concept of an ICO is as modern as the tech it is tied to.
As new as they are, though, this method of raising funds is becoming incredibly crowded. It feels like there’s a new token sale happening everywhere you look, and the struggle for anyone wishing to launch into this crowded space is how to be seen by enthusiastic investors.
What follows is a few sensible guidelines to help you to sense check and improve your offering to a marketable standard before you start the journey of organising and marketing your ICO.
The world of cryptocurrency, blockchain and especially ICOs is currently filled with huge amounts of excitement and speculation. Those feelings are countered equally by those of doubt and uncertainty. Potential investors in token sales are quite rightly asking questions like “who is really running this company?” and “can I trust this team to deliver on their promises?”. Transparency is a fantastic antidote to those fears.
Be transparent about all the following:
A token sale is not just a vehicle to raise capital. I repeat: A token sale is not just a vehicle to raise capital. For an ICO to be successful, the market needs to see that there is a reason for your token to exist on your platform. You need to be able to demonstrate exactly how your token will be used as part of a user’s interaction with your product or service.
A quick test you can try out now to get an idea of whether your token has utility: Can it be replaced directly with fiat currency? If so, you’re probably not using the benefits of the blockchain and as such you’re creating a currency and not a utility.
The amount you aim to raise during your ICO should be justifiable to your investors, rather than a figure to break a record or beat a competitor. Your raise should be in line with the amount needed to establish your platform and bring it to market, and in turn create a future demand for your product and the token. That future demand is where you should be planning to make your profit – not here at the ICO.
This ties into the initial point about transparency, but is important enough to warrant its own point. Your smart contract defines much of the utility of your token, as well as the security that it will provide users. Your ability to show that your smart contracts have the ‘seal of approval’ of a respected and independent third party is important to potential investors.
There have been many ICOs which have, on the face of it, been hugely successful in raising their planned capital in short amounts of time. Many of those same ICOs have later fallen into obscurity, because their investor base was almost entirely made up of speculators and whales, both looking to make a quick return on their investment. When those investors have dumped their tokens and tanked your value, you’re left with something far worse – no user base.
To avoid this fate, have a strategy in place to encourage future users to invest. These are the individuals who will hold your token in the weeks and months following your ICO, and the individuals who will champion your product and work with you to develop your vision. You can do this through vesting strategies for large investors, for instance.
If you’d like to talk more about your potential Initial Coin Offering, you can view our service page here: Marketing for ICOs
by Neil Edwards, 3 minute read
by Neil Edwards, 11 minute read